WEEKLY MARKET RECAP: January 31 – February 04, 2022

Happy Friday, traders. Welcome to our weekly market wrap, where we look back at these last five trading days with a focus on the market news, economic data and headlines that had the most impact on the financial market – and may continue to into the future for the US Dollar and other key correlated assets.

Thin trading prevailed at the beginning of the week, despite the positive mood, as a bunch of Asian markets including China were closed due to the Lunar New Year holiday break. Investors also paid close attention to the Ukraine crisis, as Russia added more troops around the Ukrainian borders. The US and it’s NATO allies continue to see a likely Russian invasion. EUR/USD bounced back above 1.1150 closing the day in the 1.1230 area. Gold continued to trade below $1,800 while WTI moved towards seven-year highs above the $88 mark amid supply concerns and political tensions in Eastern Europe.

Tuesday kicked off with the Reserve Bank of Australia announcing that the Cash Rate will remain at 0.10% confirming the expectations. AUD/USD slumped 50-pips following the RBA data release and ended up closing the day in the 0.7130 region. Canada’s GDP MoM expanded at 0.6% in November. This reading was well above the consensus market forecast for a growth rate of 0.3% MoM, but the Loonie did not see much of a reaction to the strong GDP figures. Later, the ISM Manufacturing PMI and JOLTS Job Opening for December in the US were released. Both reports came out above expectations driving the market towards a positive reaction. Dollar Index rose from 96.30 to the 96.40s range. Towards the end of the day, New Zealand Statistics announced the Unemployment Rate which came out slightly lower than forecasts but haven’t managed to move the needle on the Kiwi.

RBA’s Governor Philip Lowe speech in the National Press Club opened the day on Wednesday. AUD/USD did not react despite the optimistic comments of low unemployment, and strong jobs growth. EUR/USD briefly recaptured 1.1300 after the unexpectedly hotter Eurozone inflation. The annualized Eurozone CPI jumped by 5.1% in January, surprising markets to the upside, while the consensus forecast was for a softer reading of 4.4%. Meanwhile, throughout the day, an OPEC+ meeting was underway. The committee recommended a 400k BPD hike output in March. WTI even managed to briefly advance above the $89.50 level and eye a test of the $90 per barrel mark for the first time since October 2014 before dropping back to the $88.50 area.

BOE and ECB took centre stage on Thursday announcing their monetary policies statements. Firstly, we had BOE increasing the interest rate by 25 bps to 0.50% from 0.25% previous. The British Pound strengthened across the board in reaction to the announcement, pushing the GBP/USD further beyond the 1.3600 mark or a two-week high. ECB followed later on with its own monetary policy release which came out unchanged, as expected. The Euro saw minimal reaction focusing mainly to the post-meeting press conference of the ECB President Lagarde. EUR/USD traded above 1.1350 from under 1.1300 prior to the start of her press conference. Finally, we had the release of the US ISM Services PMI. The report came out higher than expectations, at 59.9 but did not have any notable reaction on the markets.

On Friday the focus was mainly on the US NFP report. Before the much-anticipated US NFP the Reserve Bank of Australia released its Monetary Policy Statement pointing out that the bank is prepared to be patient as it monitors how the various factors are affecting inflation in the country. Aussie pair refreshed weekly top the previous day before reversing from 0.7168 to the 0.7108 area. The much stronger than expected US Non-Farm Payroll of 467K combined with the unexpectedly high wage growth and very robust labour market figures helped the US Dollar jump higher. Dollar Index, which was trading around the 95.30 mark prior to data, has moved to sessions high above 95.50. GBP/USD plummet towards the 1.3500 mark while Gold was last seen traded around $1.797 after the release of the US data. EUR/USD showed little reaction to the data surrendering some gains post-NFP back to 1.1440 range. At the same time Statistics Canada released their own Unemployment Rate and Employment Change. Both figures came out on the negative side for the Loonie. The combination of much weaker than expected Canadian Labour market numbers combined with much stronger than expected US Labour market figures pushed USD/CAD higher eyeing the 1.2800 mark.

Thanks for reading! Have a great weekend.      

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